49-State Analysis: Obamacare To Increase Individual-Market Premiums By Average Of 41%

The Obamacare Rate Map, an interactive tool for learning about health insurance prices under the Affordable Care Act, was produced by the Manhattan Institute. Click on the graphic to visit the map.

One of the fundamental flaws of the Affordable Care Act is that, despite its name, it makes health insurance more expensive. Today, the Manhattan Institute released the most comprehensive analysis yet conducted of premiums under Obamacare for people who shop for coverage on their own. Here’s what we learned. In the average state, Obamacare will increase underlying premiums by 41 percent. As we have long expected, the steepest hikes will be imposed on the healthy, the young, and the male. And Obamacare’s taxpayer-funded subsidies will primarily benefit those nearing retirement—people who, unlike the young, have had their whole lives to save for their health-care needs.

41 states, plus D.C., will experience premium hikes

If you’ve been following this space, you know that I and two of my Manhattan Institute colleagues—Yevgeniy Feyman and Paul Howard—have developed an interactive map where you can see how Obamacare affects premiums in your state. (If you ever need to find it, simply Google “Obamacare cost map.”)

In September, we released the first iteration of the map, which included data from 13 states and the District of Columbia. We only had data from a few mostly-blue states because the remainder were mostly participating in the federal exchange, and the federal exchange—for reasons we now understand more fully—hadn’t released any premium information at that time. That analysis found that underlying premiums would increase by 24 percent in those 13 states plus D.C.

Obamacare’s supporters argue that these rate increases aren’t important, because many people will be protected from them by federal subsidies. Those subsidies aren’t free—they’re paid for by taxpayers–and so it is irresponsible for people to argue that subsidies somehow make irrelevant the underlying cost of health insurance. Nonetheless, it’s important to understand the impact of subsidies on Obamacare’s exchanges; later in September, we released a second iteration of the map to do just that.

Today’s release, with the third iteration of the map, contains both premium and subsidy data for every state except Hawaii. (Believe it or not, we’ve had success mining data from every exchange website but Hawaii’s.) This nearly-complete analysis finds that the average state will face underlying premium increases of 41 percent. Men will face the steepest increases: 77, 37, and 47 percent for 27-year-olds, 40-year-olds, and 64-year-olds, respectively. Women will also face increases, but to a lesser degree: 18%, 28%, and 37% for 27-, 40-, and 64-year-olds.

Biggest winners: NY, CO, OH, MA; Biggest losers: NV, NM, AR, NC

Eight states will enjoy average premium reductions under Obamacare: New York (-40%), Colorado (-22%), Ohio (-21%), Massachusetts (-20%), New Jersey (-19%), New Hampshire (-18%), Rhode Island (-10%), and Indiana (-3%). Most, but not all, of these states had heavily-regulated individual insurance markets prior to Obamacare, and will therefore benefit from Obamacare’s subsidies, and especially its requirement that everyone purchase health insurance or pay a fine.

The eight states that will face the biggest increases in underlying premiums are largely southern and western states: Nevada (+179%), New Mexico (+142%), Arkansas (+138%), North Carolina (+136%), Vermont (+117%), Georgia (+92%), South Dakota (+77%), and Nebraska (+74%).

If you’re interested in more details about our methodology, you can find them here. As with our past work, we calculated an average of the five least-expensive plans in every county in a state pre-Obamacare, adjusted to take into account those with pre-existing conditions and other health problems. We then did the same calculation with the five least-expensive plans in every county in the Obamacare exchanges. We then used these county-based numbers to come up with a population-weighted state average pre- and post-Obamacare.

Exchange plans narrow your choice of doctor, despite higher costs

The key thing to understand about our before-and-after comparison is that it is an average. If you’re healthy today, you will face steeper rate increases than these figures indicate. If you have a serious medical condition, however, and haven’t been able to find affordable health coverage as a result, you will do much better under Obamacare than the average person. Men will face steeper increases than women in most states, because women consume more health care than men do, and Obamacare forbids insurers to charge different prices on the basis of gender.

In addition, our comparison ignores other differences between pre-Obamacare and post-Obamacare plans. For example, in some cases, people looking for comparably-priced coverage on the exchanges will need to accept higher deductibles and other cost-sharing arrangements.

Importantly, post-Obamacare exchange plans will typically have narrow networks of physicians and hospitals, especially excluding those tied to prestigious medical schools. In today’s Wall Street Journal, Edie Sundby, who struggles with gallbladder cancer, argues that her pre-Obamacare access to leading academic cancer centers like Stanford has “kept me alive,” and notes that the plans available to her on the exchange don’t allow her to keep her doctor.

Elderly will receive massive subsidies, thanks to younger people

Thanks to community rating, a key feature of Obamacare, insurers are only allowed to charge their oldest customers three times the amount they charge their youngest customers. Because 64-year-olds consume on average six times as much health care as 19-year-olds, this rule has the effect of driving up the cost of insurance for young people.

But there’s a double whammy. Because premiums for those nearing retirement can still be three times higher than those of younger Americans, elderly individuals will disproportionately benefit from Obamacare’s subsidies. The subsidies increase in proportion to the percentage of your income that is tied up in health insurance; for elderly people whose premiums are much higher, the subsidies are higher too.

And when I say young people, I particularly mean young men. A young woman of average income in the average state will experience little net change in premium costs, if you take subsidies into account; 40-year-old women will see an average increase of 9 percent, and 27-year-old women will see an average decrease of 5 percent. (However, as I noted above, women in good health will see meaningfully higher increases than these averages reflect.)

Let’s take the two extremes. If you’re a 27-year-old man, your average premium under our methodology, pre-Obamacare, is $133 a month. Post-Obamacare, that increases to $201. If you add in the subsidies that accrue to someone with the median income of a 27-year-old man, the net cost of Obamacare insurance goes down slightly to $188. That’s a 41 percent increase, despite the impact of subsidies.

If you’re a 64-year-old woman, on the other hand, your average pre-Obamacare premium was $430 a month. Post-Obamacare, the underlying premium increases to $545 a month. But when you factor in subsidies for the average 64-year-old woman, the net cost of Obamacare insurance drops to $292. That’s a 32 percent decrease, inclusive of subsidies, from pre-Obamacare premiums, and a 46 percent discount off of post-Obamacare prices.

The irony is that, in 2012, younger voters overwhelmingly supported President Obama, while older voters backed Mitt Romney. Obamacare, in the average state, is a massive transfer of wealth from the young to the old.

This all assumes, of course, that the exchanges eventually work

Right now, the headlines are dominated with stories about the deep and thorough dysfunction of the federally-built Obamacare insurance exchange. It’s a serious problem. If the exchanges aren’t fixed soon, the likely outcome is that older, sicker, and poorer people sign up, while everyone else goes without coverage. That, in turn, will imbalance the insurance pool in the exchanges, making its products more expensive and subsidy-dependent. Those facing cancellation of their existing coverage face the greatest risk under the worst-case scenario.

But there is a best-case scenario, especially from the standpoint of the law’s supporters. It’s that the exchanges eventually get fixed, and turn out to be popular, even among the young men—the “bros”—who bear the steepest costs under the new system. If they do, not only will Obamacare be here to stay, but the law could end up evolving into an effective replacement for our older, single-payer health-care entitlements, Medicare and Medicaid.

From where we stand today, unfortunately, there is no reason to believe that the Obama administration has a handle on the problems with the federal exchange. Young men seem no more likely to buy a costlier insurance product than they were to buy one, pre-Obamacare, that was more affordable. And so we should remain concerned about the likelihood of the law’s ultimate success.

METHODOLOGY NOTES: As noted in the text, please refer to our methodology page for a detailed description of how we arrived at these numbers. Notably, there are some quirks with the way the “Your Decision” data is displayed on the interactive map:

A few important notes are also in order. The breakeven point is only available for those states where we found rate increases for a median income household with subsidies. In states with a decrease, the inflection point is labeled with as “0…”

As of this writing, we have been unable to find data for Hawaii for datasets 1 and 2. Additionally, the average of 5 cheapest plans in Alabama ends up being more expensive than the second-cheapest silver plan (which is used to calculate subsidies). Thus, in Alabama, we assume, for the purposes of developing a net cost of insurance for the median individual, that the individual purchases the second-cheapest silver plan.

Thanks to Paul Chung, our Manhattan Institute intern, who helped us develop data-mining software that we used in this analysis. Yevgeniy Feyman led a group of PhD students who helped crunch the numbers. We collaborated with Jonathan Wu and Brian Quinn of ValuePenguin, a consumer finance website, to obtain data from certain states.

INVESTORS’ NOTE: The biggest publicly-traded players in Obamacare’s health insurance exchanges are Aetna (NYSE:AET), Humana (NYSE:HUM), Cigna (NYSE:CI), Molina (NYSE:MOH), WellPoint (NYSE:WLP), and Centene (NYSE:CNC), in order of the number of uninsured exchange-eligible Americans for whom their plans are available.

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I’m part of the age group this disaster is trying to court, and no thanks, I see no reason to toss money into yet another federal money pit they can steal from. What needed to happen was the reform of existing policies and practices, not some socialist redistributing the wealth. When Medicare and Medicaid run 60 billion+ in fraud each and every year you know the government has no clue in what it is doing.

I dissent and will not participate and I know of no one in my age group who has enrolled.

Cut the over 7 billion per year 970 billion spent on F-35 built by the dozens and, new Submarines cant eat those. The cost of all 2 are paid for and, three social programs cost about 280 million per year the same cost 280 million for one yes 1 F-35 excluding cost to fly them and, very limited use in a time we are going to never ever Fly them!! Kids are starving in this country cut out this foreign aid as they get so much from other countries!Our kids need a chance know they are the future to keep our jobs here with higher education in Math and, Science sadly in the Tech Industry!We can make the part for an I Phone but we send off those parts to Asia to put them together and, make them work because our kids are so far behind 4th in Math and,Science in this Country in the Tech Field. other wise we are done as country economically for another 2 decades possible 4 decades even if we can catch up the the Countries in Asia and, China that get most of our tech jobs know. Cut back so much Pentagon pure Wasteful spending and, these Billions to Countries as in Aid as our Future is right here right now. there isn’t a future economically only the Rich will keep taxing the middle class more and, they will hide their assets not paying taxes Lining there Pockets bigger and, bigger. The Fraud you are way off, the only real fraud is Government Fraud.. a Fact!!!!!!

Thank you Tony. You are so right. Always about the rich crying over having to lose some of their billions in profits. But we, the working class who have worked all our lives and been cheated for decades, are the entitled ones. I am so sick of this “entitlement” issue. We paid, we saved and we got screwed. People forget so easily that this economy would be in even worse shape had the government not bailed out all those rich creeps that steal our money, homes, economy and all the things we worked so hard to build. Morals and values are mocked now and the young can’t wait for the elderly to die so they can have what little money they managed to hang on to. Just love how this article wants to claim that middle aged to senior citizens who have helped to build this country, have had all these years to save for our medical. Yet they talk about how social security couldn’t have predicted that people would have lived longer. Always pointing the finger of blame instead of doing something simple like you suggested. Reallocate the money that is ours to begin with and put it back into rebuilding this country. Stop letting these people lie to us and stop letting them rob us.

Look carefully at the charts. The ACA is trying to “court” you, a man, by giving you a greater premium increase than women relative to what you were previously paying, despite the fact that men use health services less than women. Older men were paying more than older women pre-ACA, to my surprise.

Once men learn all this, even liberal men might revolt.

“What Does President Obama Mean For Men?” http://malemattersusa.wordpress.com/2012/10/26/what-does-president-obama-mean-for-men/

Raptor, based on what I have read in a variety of publications the word is out that the IRS is almost powerless to enforce the penalties for not being insured (is an unenforceable law a law?). It is restricted to essentially only withholding from refunds which can be avoided by planning estimated tax payments, etc. As a result, the youngish crowd have been saying that they take your position and if they need insurance outside of the exchange open enrollment period they will get it in the off-exchange market which might be more expensive but on average probably no higher than getting an exchange policy at this time. If this behavior becomes the norm Obamacare will quickly implode.

As far as your anti-socialist rant, US Corps are the largest beneficiary of socialization. You don’t have a problem with Exxon-Mobil, Monsanto, ADM, GE, Boeing and other corp subsidies. The healthcare system is already heavily subsidized. Besides the laws are written by the corp lobbyists, not what the people think is best. So rethink your anti-socialization rant. Technically the US is more Fascist than capitalist. Point your finger at the administration of your choice however, they ALL have a hand in this designed plan.

Tony, I agree in general. The point you are raising I think is “where did the money go?” I don’t mind paying taxes, I just object to the ways it is wasted. The last point I will make concerning foreign aid is a paraphrased quote “England does not make peace, she buys it” sums up our foreign policy.

Fringe alert – there is a theory called the 3 city state plan, where 3 city states run the world. World Banking is managed by the city of London (which is separate from what we normally call London, it has its own government); Vatican City is the head of religion, and Washington DC is the military might. While one can argue the conspiracy aspect, no one can argue the practical ramifications of such an alliance.

As much as you want to blame the government for the shortcomings of the Healthcare industry-and you’re placing fraud blame on the government-it is, in fact the private system that created the mess we now live in. While I can agree that the Affordable Care Act is the final solution for our woes, it is a step in the right direction and a shift away from the debacle it has become. And, the only reason why ‘bro’s’ of YOUR generation do not, and will not buy into the exchange is because you’re addicted to spending the disposable cash you earn on things you REALLY don’t need. I’m some what guilty of this too. However, is asked…is there any one thing more important then healthcare to spend YOUR money on? Perhaps you spend less on drinking, going to ball games (that pay pro athletes far too much money), video game consoles and fashion and pay into the system–this will bring the premiums down for everyone in the long run. I’m lucky to live in NY and can already see the savings AND i don’t need my company dangling a lower wage over my head just because they provide me with a less then desirable healthcare plan.